Australia Releases White Paper for A “Tokenized Economy”

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Australia is open to delving into the potential advantages of using a CBA digital currency.

As the world is gradually turning digital, many technological advancements are brought to society. One great example is a digital currency—a currency that solely exists in digital or electronic form. National Geographic said in one of their articles, “the emerging technology of digital currency may affect and change how we see, use, and save money in the years to come.”

The Central Bank of Australia plans to pilot the Australian central bank digital currency (CBDC) until mid-2023. The efforts started in July and will be finished in the middle of 2023. The Reserve Bank of Australia (RBA) considers a digital version of the Australian dollar.

It is working together on the project with the Digital Finance Cooperative Research Centre (DFCRC), a research initiative supported by the financial industry and government funding. The two published a white paper this week for the said project.

For context, a white paper is a document containing the whole purpose of the project. In this case, it is a component of the current research pilot study by the RBA and DFCRC to determine a use case for an Australian central bank digital currency (CBDC), explain the design of the new eCurrency, and the main objectives of the initiative; it is entitled: “Australian CBDC Pilot for Digital Finance Innovation.” 

The RBA declared that members of the sector were encouraged to suggest use cases that could enhance Australia’s financial and economic system. Australia is devising new ways to escape the growing possibility of a recession.

According to the monetary policy regulator, one of the most critical objectives is investigating business models that a CBDC might support. The pilot project will give financial authorities a greater understanding of the technological, legal, and regulatory aspects of issuing a central bank digital currency. 

The DFCRC will implement the pilot CBDC platform. At the same time, the RBA will be in charge of various supervisory and regulatory duties as well as the issue and redemption of the pilot CBDC. This will be a standalone platform used only for the pilot CBDC’s issuance and transactional operations. 

It will utilise smart contract (ERC-20) interfaces and JSON-RPC APIs on a private Ethereum network called Quorum. It will be called eAUD, and all holders must be “identity-validated by their use case provider or an approved KYC (know-your-customer) service provider.”

People may be intimidated by this innovation. But, The Australian CBDC PilotT For Digital Finance Innovation: White Paper indicates that:

“Activity and innovation in digital finance suggest new business models might emerge in a tokenised ecosystem. Central banks are working to understand the role of value transfer in these emerging digital economies because of their role in the issuance of money, maintaining the stability of the financial system, and supporting the development of the payments system. In this context, central banks globally are actively exploring the potential role, benefits, risks, and other implications of CBDC.”

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